The University released its annual financial report for fiscal year 2021 Nov. 18, according to a Today@Brown letter from President Christina Paxson P ’19.
The financial report details specifics of the University’s financial statements, fundraising and investment performance for FY21.
“While the COVID-19 pandemic presented the University with significant challenges in Fiscal Year 2021, our strong mitigation efforts — combined with tremendous market growth and record-breaking fundraising — enabled Brown to close the year in a strong financial position,” Paxson wrote in a letter released alongside the Financial Report.
Financial challenges posed by COVID-19 pandemic
The COVID-19 pandemic and actions taken by the University to prevent the spread of the virus, such as creating an asymptomatic testing program and renting hotels and apartments in Providence to allow for single occupancy living and off-campus isolation, created several financial challenges through FY21, according to the report.
“Operational costs have been pressured upward by COVID related expenses,” Michael White, chief financial officer and vice president for finance, wrote in an email to The Herald.
Pandemic-related expenses “exceeded $55 million” in FY21 alone, according to the report, leading to total operational costs of just under $1.059 billion. This is an increase from FY20’s operational costs of just over $1 billion.
Beyond the 5% increase in operational costs, the University also saw a 3% — or $30 million — decrease in operational revenue driven “primarily by major reductions in room and board, tuition revenue and other auxiliaries,” such as dining- and bookstore-related revenue.
The loss in operational revenue and increase in operational costs contributed to the University’s $93.4 million deficit for FY21 — an increase from FY20’s $8.9 million deficit.
Though significant, the deficit “wasn't unexpected due to robust planning,” White wrote. “The deficit demonstrates the University’s commitment to protecting and supporting its community during the pandemic.”
To mitigate some impacts of pandemic-related financial challenges, the University increased the endowment payout by 0.2% of its 12-quarter average value.
“The University typically draws between 5.5% and 4.5% from the endowment,” so although the budget appropriation increased from 4.8% to 5%, it “was well within prescribed limits,” White explained.
Aside from pandemic challenges, remote and hybrid classes mean “the University has also seen some operational efficiencies and savings,” White wrote.
White also predicts that financial expenses related to pandemic costs will decrease significantly in the next year.
“While we do expect continued COVID-related costs, and have already incurred substantial testing costs (in 2021), total costs are projected to be well below last year's levels,” he wrote.
University asset growth outpaces S&P 500 Index
While ending the year with a deficit, the University’s net assets saw growth primarily driven by endowment performance and high levels of fundraising, according to the report. This growth enabled the University to end the fiscal year “in a strong financial position,” Paxson wrote in the Today@Brown announcement.
“This was an extraordinary year in financial markets,” White wrote. “Most of the price declines that accompanied the onset of the pandemic actually took place in the prior fiscal year. The response to the crisis by governments around the world came in the form of both monetary and fiscal stimulus, which helped push prices higher.”
According to the financial report, the endowment and University assets generated “$2.4 billion in investment income in FY21, equating to a 51.5% return, and bringing the endowment and other managed assets to an all-time high of $6.9 billion.” Brown’s net assets grew to just over $7.8 billion — an increase of 43% from FY20.
The endowment, which is used to support portions of the University’s operating costs such as financial aid and endowed professorships, is managed predominantly by external investment partners, White wrote.
Over the past three years, the University’s annualized return on its endowment has exceeded the S&P 500 Index — which tracks the stock performance of 500 companies — by 5.4%, up from 1.7% over the past twenty years. For FY21, the University’s endowment performance outperformed the S&P 500 Index by 10.7%.
FY21 was also the “most successful fundraising year in Brown’s history,” according to the report, with a total of $430.5 million in gifts and pledges. Through the BrownTogether fundraising campaign, the University raised its highest cash amount thus far: $302 million, an increase of $50 million from last year. Fundraising was primarily driven by alumni, who contributed 67.7% of donations.
Financial growth contributes to Building on Distinction
According to Paxson’s letter, the Financial Report has a different theme each year “to share progress in key areas of the University’s strategic plan, Building on Distinction: A New Plan for Brown.”
This year’s theme was “the University’s commitment to using science and technology to improve lives,” Paxson wrote.
The Financial Report focused on the work being done in data and computational science, specifically on the contributions of the Data Science Initiative, the Department of Computer Science, the School of Public Health, the Center for Computational Molecular Biology and the Carney Institute’s Center for Computational Brain Science.
“The work we do and (will) launch in the near future is going to involve and have an impact on all disciplines on campus,” said Sohini Ramachandran, director of the Data Science Initiative and the Center for Computational Molecular Biology.
“The world that we live in now is data-driven and touches all parts of our lives,” Ramachandran added. “You’d be hard pressed to find an area of study that isn't impacted by data.”
With University support, the Data Science Initiative’s home at 164 Angell St. underwent renovations, and the initiative hired additional faculty under the guidance of former Data Science Initiative Director Bjorn Sandstede.
Ultimately, the “goal of the Data Science Initiative is to partner with … all disciplines across campus in order to demonstrate that … data fluency is crucial to a liberal arts education in our world today,” Ramachandran said.
The report also highlighted work being done in the Center for Computational Brain Science under the University’s Carney Institute for Brain Science.
CCBS aims to “understand the link between mechanisms in the brain and mind at all scales, … focusing specifically on computational methods,” CCBS Director Michael Frank said.
“Like in many domains of science, using mathematical and formal approaches allows us to be more precise about how the brain is working … and discover new things about complex patterns,'' Frank added. “The brain is the most complex thing we know of in the universe, so we need computational tools to try to address that.”
Frank is also looking forward to the growth of a new program called Brainstorm. Supported by a donation from the Carney Institute, Brainstorm focuses on applying academic findings to brain health problems, including mental health and neurological disorders, Frank said.
Finally, in the Biostatistics Department, professors work on “applied statistics with emphasis on health related areas,” Director of the Center for Statistical Sciences Constantine Gatsonis said.
Professor of Biostatistics Ani Eloyan, for instance, is currently working on Longitudinal Early Onset Alzheimer’s Disease after receiving a large multicenter grant.
“The study is aimed at collecting and publicly sharing a lot of different types of data from people who have early onset Alzheimer’s, and our center is advising on data collection design, quality monitoring and analysis plans for the study,” Eloyan said.
While the center’s research is primarily supported by large government and research grants, the University supports the daily operations and staffing of the department.
White ultimately said that because of the University’s work on containing expense growth and identifying new revenue opportunities, he is optimistic about the University’s fiscal future.
“These efforts combined with strong fundraising and investment returns will undoubtedly have positive long-term impacts here at Brown,” White said.
